Per Shri A. Kalyanasundharam, Accountant Member - The appeal by the assessee who is late as he passed away on 6-4-1985. The names of the legal heirs have been submitted by the learned counsel for the assessee, and the name of the eldest son has now been mentioned as the appellant.
2. The learned counsel Mr. N. M. Ranka submitted that the appeal is against the imposition of penalty of Rs. 1,63,500 levied under section 18(1) (a) of the Wealth-tax Act, 1957 (the Act) for not filing any return either under section 14(1) of the Act or in response to notice under section 17 of the Act. Mr. N. M. Ranka submitted by referring to a chart wherein the position of wealth as was accepted up to 1969-70, that the position of wealth up to 1962-63 was in negative. Mr. N. M.Ranka further submitted that since the position continued thereafter, the assessee never filed any return from 1963-64 to 1969-70. For these years there was no notice from the department for filing the return and no proceedings under section 17 were initiated. Proceedings under section 17 were initiated for the three assessment years 1970-71 to 1972-73. For the assessment years 1973-74 to 1975-76 agains there was no return filed by the assessee and no proceedings initiated under section 17. For 1976-77 a return was filed for Rs. 33, 715 and it was assessed at Rs. 2,10,000 after appeal. In the appeal the only point that was allowed was the liability due to the sons of the tune of Rs. 1,85,000. Again from the assessment year 1977-78 onwards the assessee did not file any return.
3. Mr. Ranka submitted that as per the department the notice under the section 17 was claimed to have been served on 8-2-1979. As per this notice the return should have been filed by 8-3-1979. The assessee did not file any return as the notice was served on the assessee. The assessment was completed ex parte under section 16(5) of the Act on 26-11-1979 on a total wealth of Rs. 4 lakhs.
4. If the assessee was liable to wealth-tax, the assessee normally should have filed the wealth-tax return by 30-9-1970. According to the departmental the period of default works out to 109 months, i.e., the period starting from 1-10-1970 and ending on 31-10-1979. Mr. Ranka raised two questions on the period of default, namely (a) whether it is 109 months or, (b) 7 months, i, e., from 8-3-1979.
4.1 According to Mr. Ranka in view of the chart showing the position of wealth as assessed up to 1962-63 and also containing information regarding no wealth-tax return up to 1969-70 and no proceedings initiated for these years, the assessee was under no obligation to file this return. This is so as the assessee was under a bona fide belief that his wealth was in the nagative. Since the wealth was in the negative and there being no liability to wealth-tax, there was absolutely no obligation for filing the return. When there is no obligation to file the return in view of these facts, the assessee cannot be said to have committed any default on 1-10-1970. Therefore, the period of default cannot be worked out to 109 months.
5. As regards the period of default of 7 months, Mr. Ranka submitted that the assessee was not served with a notice under section 17. This fact is not denied as the assessee due to ill-health and lack of medical facilities at small place, viz., Banswara, shifted to Indore in that year. He was ailing since then and remained at Indore continuously. Mr. Ranka in support of this contention referred to page 44 wherein he had filed the copy of tenancy agreement between the late assessee and the landlord. According to this agreement, the late assessee rented the apartment at Indore from 1-7-1969 and remained there till he died on 6-4-1985. Since the assessee was away from Banswara, the assessee-could not receive the notices that were sent to Banswara address. Mr. Ranka also referred the doctors certificate at page 43 which doctor was examining the assessee right from 1970.
According to the certificate, Mr. Ranka submitted that the assessee away suffering from gall bladder and heart trouble and was not permitted to move out of bed. The assessee was chronically sick and needed constant care. Mr. Ranka then referred to page 47 which is a letter submitted in response to the penalty notice dated 17-3-1981. In this letter, it has been categorically stated that : (a) the assessee had no taxable wealth and that his earlier wealth-tax assessments were at nil figure.
(b) the assessees ill-health prevented him from filing any wealth-tax return which was something beyond his control.
5.1 Mr. Ranka, therefore, submitted by referring to the order of penalty that in spite of these facts the penalty has been imposed by rejecting the arguments and submissions of the assessee. The WTO has considered the submission as an excuse of the assessee. He further, states that a number of notices were served on the assessee. He, therefore, concluded that there was a conscious disregard of his obligation as he has failed to respond to the various notices. The WTO further states that there is no evidence in regard to the illness of the assessee and thereby he imposed penalty of 109 months.
6. In appeal, the Commissioner had upheld the order of the WTO on the ground that assessment for the assessment year 1971-72 was concluded in October 1973 and the wealth was estimated at Rs. 8 lakhs. The assessee had taken up the matter in appeal and the wealth was reduced to Rs. 4 lakhs. According to the Commissioner the notice under section 14(2) of the Act which was served on the assessee for the assessment year 1972-73 should have given an indication to the assessee that he was obligated to file the return for 1970-71 as well. According to the Commissioner, the notices for the assessment year 1971-72 and 1972-73 should have been treated by the assessee as relevant to the assessment year 1970-71. The learned Commissioner further says that the assessment for 1970-71 was also completed at a figure of Rs. 4 lakhs which figure is the figure that was assessed finally in appeal for the assessment year 1971-72. The learned Commissioner was, therefore, of the view that the above two assessment s clearly contradict the statement of the assessee that he was under bona fide belief that his wealth was below taxable limit. According to the Commissioner since the wealth was determined at Rs. 4 lakhs, the assessees explanation of bona fide belief has been found to be false.
7. According to Mr. Ranka, in view of the Rajasthan High Court decisions in CIT v. Rawat Singh & Sons  120 ITR 65 and in the case of Sohanlal Duggar  Tax World section 3 page 30, the mala fide intention of withholding the return has not been established, rather the statement of page 47 clearly indicates and supports that the assessee was fully justified in his bona fide that his wealth was below taxable limit as his wealth was assessed at a minus figure. Mr. Ranka also relied on Himatram Mathurdas & Co. v. CIT  132 ITR 14 (Guj), V. L. Dutt v. CIT  103 ITR 634 (Mad.) at page 648, Addl. CIT v.I. M. Patel & CO.  107 ITR 214 (Guj.) (FB), Sunderdas Thackersay & Bros. v. CIT  137 ITR 646 (Cal), Smt. Indu Barua v. CWT  125 ITR 436 (Gauhati), Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar PradeshHindustan Steel Ltd. v. State of Orissa 8. Mr. Ranka submitted that the ill-health was against disbelieved and held to be not reasonable cause, on the ground that the assessee had never sought any extension of time. Mr. Ranka submitted that what is irksome is the fact that when the assessee was not at all present at Banswara and was away for treatment at Indore all these three years, how could he had sought any extension of time or file any return.
Exphasis for confirmation of the penalty is more on the fact that the wealth has been assessed at Rs. 4 lakhs for three years 1970-71 to 1972-73. Mr. Ranka submitted that when a person has to file his return, he has to look into his wealth as of latest year and compare it with the position or wealth for the year under review. The department accepts the fact that the assessee had not added anything to his wealth and in fact the wealth has decreased due to lot of expenditure on his medical treatment. Further, the department is also aware of the fact that the privy purse granted by the Government is just Rs. 1,20,000 per annum with which the assessee had to maintain his large family and his other old properties. The department was also aware that the assessee had gifted certain properties in the earlier years itself but in the ex parte assessment the same was included. The department is also aware that these very properties have been excluded in the subsequent years.
The value of such properties is to the tune of Rs. 2 lakhs, the figure at which they have been assessed in the assessees hands. The assessee had a liability owing to his sons to the tune of Rs. 1,85,000. If this is also excluded then the wealth would be very much below taxable limit of Rs. 1 lakh. IT is, therefore, clearly established the fact the bona fide belief was based on facts and is not merely a submission for the sake of submission and cannot be said to be an excuse as has been held by the learned AAC.9. Mr. Ranka relied on Smt. Indu Baruas case (supra) for the proposition that the notice must be served on the assessee. He also submitted that the penalty should be on the basis of the law in force at the time of initiation of penalty proceedings or on the date at which the department considers that the assessee had defaulted. Mr.
Ranka referring to section 18(1) (a) submitted that the law has been changed with effect from 1979, according to which the penalty livable is 2 per cent of the assessed tax. Mr. Ranka also submitted that since according to the department the assessee had defaulted. who is now dead, penalty cannot be imposed on such dead person. He referred to provisions of section 19 of the 1957 Act as also provision of section 159 of the Income-tax ACT, 1961. For this proposition he relied on Rameshwar Prasad v. CWT  124 ITR 77 (All), CWT v. V. Varadarajan  122 ITR 1014 (Mad.) and Smt. Yawarunnissa Begum v. WTO  100 ITR 645 (AP) Mr. Ranka finally submitted that taming into the overall position right from 1963-64 onward and even 1972-73 and 1976-77 and thereafter, it clearly establishes that the assesse was justified in his bona fide belief that his wealth was below taxable limit and further if it is held that the assessee had default then the period of default starts from the alleged serving of the notice, i.e., in February 1979. The penalty, therefore, if any, impossible should be as per law on the date of default i.e., February 1979 which is at 2 per cent of the assessed tax for every month of default.
10. Mr. S. S. Ruhela, the learned departmental representative on the other hand submitted that the assessee before the WTO had taken 3 grounds; (a) Bona fide belief, (b) illness, and (c) Ignorance of law of the three, the assessee dropped the plea of ignorance of law before the AAC. Mr. Ruhela further submitted that the notice under section 17(2) for the assessment year 1971-72 was served on the assessee on 15-10-1971. This must have definitely caused awareness that his return for 1970-71 is due. Further the awareness must have been arisen consequent to the assessment having been completed on 19-10-1973. Mr.
Ruhela further submitted that one of the notices which was issued some time in November 1972 mentioned the year as 1970-71. Mr. Ruhela, from the records of the department produced for the verification of this Bench the notices containing the year mentioning as 1970-71.
1. Mr. Ruhela, therefore, submitted that it would be wrong on the part of the assessee that he was not aware of his obligations and even his bona fide belief is an excuse on the ground that the assessment for 1971-72 was completed on 19-10-1973 at a figure of Rs. 8 lakhs which was reduced in appeal to Rs. 4 lakhs. Even assessment for 1971-72 was concluded at a figure of Rs. 4,95,000. The assessment for the year under review was completed at Rs. 4 lakhs against which the assessee did not file any appeal. According to Mr. Ruhela, it clearly established the fact that the assessee was made aware that his wealth is in the range of Rs. 4 lakhs which is very much above the minimum taxable limit. This clearly establishes that the assessee was in obligation to file the return.
11.1 Mr. Ruhela further submitted that the obligation to file the return is further fortified by the fact that the assessees sons had written off the amounts due from their father, i.e., the assessee which was in the range of Rs. 1,85,000. The assessee cannot be said to be not aware that there is no liability at all to the sons from 1970-71 onwards. Mr. Ruhela referred to the order for 1971-72 which is at pages 25 to 32 wherein there is a detailed discussion about the liability which has not been allowed. Mr. Ruhela further submitted that this appeal was decided by him as an AAC and the assessee was allowed relief of Rs. 4 lakhs and his wealth was reduced to Rs. 4 lakhs. The wealth included 4,000 acres of forest land the value of which is of Rs. 1,50,000 as its annual income yielded is in the range of Rs. 12,000.
Mr. Ruhela relied on the order of the Supreme Court in the case of CWT v. Suresh Seth  129 ITR 328 for the proposition that since the assessee was under an obligation to file the return on 1-10-1970 and he having committed default in not filing the return, the law in force on that day would be applicable to the facts of the case. At that time the law was half per cent of the net wealth for the period in which the default had continued. He, therefore, submitted that the penalty has been rightly levied on the assessee. Mr. Ruhela further relied on the orders of the Gauhati High Court in Sewbalakram & Co. v. CIT  146 ITR 148. He also produced the Jaipur Bench Tribunals order dated 19-3-195 in the case of Dhariwal Medical Agency. He also referred to Vermas Wealth-tax Act, 2nd edn., page 1/632.
12. We have heard the rival submission and considered various materials that have been placed on record. The chart at page 50 as has been submitted by the assessee showing the wealth position as assessed from 1957-58 onwards to 1970-71 is given below : No return filed as wealth was below taxable limit. No notice was issued by the Wealth-tax Officer as he was satisfied that there was no taxable wealth. No assessment was framed.
We also reproduce the chart which is filed at page 51 which gives the position from 1971-72 onwards : No return filed as wealth was below taxable limit. No to notice was issued by the Wealth-tax Officer as he was 1975-76 satisfied that there was no taxable wealth. No assessment was framed.
No return filed as wealth was below taxable limit. No to notice was issued by the Wealth-tax Officer as he was 1984-85 satisfied that there was no taxable wealth. No assess ment was framed".
Comparing the above two charts, it gives a fair impression that the assessee belief that his wealth was below taxable limit is not out of place. The assessees obligation under the statute is to file a return in case his wealth exceeds that taxable limit.
According to the assessee, the wealth position was such that there was no liability to wealth-tax. The question that arises is penalty impossible on the basis of the assessed wealth treating the assessee to have known that his wealth would be that at which figure he has been assessed. In this connection the two cases that have been cited by Mr.
Ranka i.e., CIT v. N. Khan & Bros.  92 ITR 338 (All) and CIT v.Assam Automobile & Accessories Agency  111 ITR 411 (Gauhati) indicate that penalty for non-filing of the return must be seen from the viewpoint of the assessees belief as to whether it was based on facts and whether the belief could be said to be bona fide or not. In N. Khan & Bros case (supra) their Lordships of the Allahabad High Court have categorically observed that the income that is contemplated by the provision of the Act is the income which the assessee believes to be his income and not the income that has been finally assessed by the ITO. They have also observed that it is quite likely that the assessee may have a particular view, while on the same subject the department may held it otherwise. In such an event what is important is the fact as to whether the assessee under a bona fide that such item of income was not his income and in such a situation he will not be compelled to file a return and penalty is not eligible. The Gauhati High Court in the case of Assam Automobile & Accessories Agency (supra) have held an identical view. This is further fortified by the Rajasthan High Court decision in Rawat Singh & Sons case (supra) and in the other case of Sohanlal Duggar (supra) for the fact that the mala fide intention of the assessee is necessary to be established. In the instant case the fact of the assessee are identical in nature with the cases before the Allahabad High Court and the Gauhati High Court. Similarly, is that the assesse did not file any return on the basis of his part experience of certain liabilities being held as allowable and allowed and as also the assessed value of certain other properties. The assessee was under a bona fide belief that he was liable to pay the amount that is owning by him to his sons. It is totally irrelevant that the recipient, i.e., sons have written off the amount as not recoverable on the ground of the financial position of the assessee. In respect of a debt declared to be free, the agreement must be from the creditor as well as from the debtor. The fact, that the creditor, i.e., the assessee had owed debt and goes to indicate the intention of the assessee that it is a debt as far as he is concerned. This debt having been allowed to him in the past, the assessees belief that it would be allowed even for the year under review is fully justified. Similar is the case in respect of valuation of the forest land measuring 4,000 acres. The assessee was under a belief that its value was much less than what it was assessed.
Therefore, in respect of both these items as against the bona fide belief of the assessee of its value and liability, they have been assessed at a higher figure and a liability not allowed. Therefore, respectfully placing reliance on the above two judgments of the Allahabad High Court as well as the Gauhati High Court supra, we are convinced that penalty under section 18(1) (a) is not eligible on the basis of what has been assessed when the assessee was under a bona fide belief that his wealth was not liable to wealth-tax. This we have taken by taking into account the identical nature of the fact and in the circumstances of the assessees case, as also the cases before their Lordships in the Allahabad High Court and the Gauhati High Court.
13. The illness and the assessee having shifted to Indore is all supported by evidence which have been rejected. However, since on fact we have held that the penalty cannot be sustained, we do not feel it necessary to answer the other question about as to whether the default as occurred on 1-10-1970 or in March 1979. Similarly, we are not answering the question about the applicability of section 19 on the legal representative as the assesse is dead just before the hearing of this appeal.
14. In the result, the appeal of the assessee is fully allowed. Since the appeal has been decided on merits, stay application becomes infructuous hence dismissed.